Bankruptcy Credit Card Debt Discharge

Can I Get Rid of Credit Card Debt in Bankruptcy

One of the major reasons that people file for Bankruptcy is to cancel, or discharge, credit card debt.  Credit cards tend to have high interest rates and also high late fees and other costs.  Because credit card debt is in essence a high risk loan, the high cost of borrowing is not surprising.

Credit card companies do however, target college students and people with limited resources, including recently bankrupt debtors, with marketing plans that take advantage of inexperience and desperate situations.  Credit cards are a means of getting by as a last resort but the resulting high minimum monthly payments can push a person quickly toward bankruptcy.

Most Credit Card Debt Can Be Discharged in Bankruptcy

The good news is that most credit card debt can be discharged in bankruptcy as is true of most unsecured debt.  Unsecured debt is debt that is not a lien on real or personal property. Examples of secured debt are a home loan or an auto loan.

Some credit card debt can however, be secured debt.  Department store credit cards, like Sears, or cards issued for a specific purpose such as financing the purchase of major appliances, may be secured in part.  Typically, major appliances on your Sears card are secured, while back to school clothes are not.  This means that the portion of the bill that is secured must be reaffirmed in order for the debtor to keep the appliances.

Another common secured consumer credit debt is the purchase of tires and wheels from tire company chains.  If Les Schwab Tires issues a credit card for such a purchase, the debt is most likely secured.  In either case, the creditor will usually provide a reaffirmation agreement, a reduced balance and a new lower monthly payment.

Some unsecured credit card debt may also be non-dischargeable.  If the credit card debt was incurred for “luxury items” within 90 days of the bankruptcy filing, then those charges will not be canceled.  The statute includes in the definition, of “fraud, false pretenses and intent to deceive”

  • 523.  Exceptions to discharge.
  1. consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
  2. cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable; and
  3. for purposes of this subparagraph-(I)  the terms “consumer”, “credit”, and “open end credit plan” have the same meanings as in section 103 of the Truth in Lending Act; and (II) the term “luxury goods or services” does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor;

A presumption of non-dischargability means that the creditor does not need to prove anything to keep the debt from being cancelled.

Discounts For Discharging Credit Card Debt

Another option has become available because of the recession and failure of many financial institutions since 2008.  Credit card companies and collectors will usually give a deep discount, some up to 70%, for a lump sum payment.  Note however, that a debt that is written off will be shown as income on your taxes unless you meet some specific exemptions.  This is because the creditor will claim a loss for tax purposes.  Debts that are discharged in bankruptcy, on the other hand, are not taxed as income.

can i get rid of credit card debt during bankruptcyA simple question often times has a complicated answer in the world of bankruptcy. An experienced bankruptcy attorney can help you consider all options, including non-bankruptcy workouts.

 

 

Bankruptcy: Sometimes, It’s Life

What would happen if………..

  •  You lost your job in a bad economy…..
  • You became ill and couldn’t work for a year…..
  • Your business went belly up and you had no income …….
  • Your spouse died and left half of everything to a zebra rescue center…..?

As much as we want to deny it, most of us haven’t been able to save enough money to survive for the amount of time it would take to get back on our feet. Why is that? Because life happens and unless we have lived in a cave somewhere, it’s very expensive.

Sometimes Budgets Can’t Compete With Life

All the budgets in the world can’t compete with the credit card marketing campaigns encouraging us to spend more than we have. The yearnings for a tropical vacation, just like the one the Joneses next door went on, are strong after a long year of hard work. And, our twin girls are both getting married this summer syndrome is no piece of cake either.

For others, circumstances beyond their control have stolen their lives without regard to the suffering affecting their families. I cannot say the word stolen strongly enough because of all I’ve witnessed as an attorney.

For all of the reasons above and many more, people come to my office to share their experience with me and ask for my advice with regard to their future. We talk about bankruptcy. Some days, when I leave my office I can’t just lock the door and leave my client’s worries behind me. Some have had devastating losses, some have debt that has built up over time, some have simply tried to live the American dream and found out it’s not so easy. All come with a feeling of shame.

The Stigma Of Bankruptcy

The stigma of bankruptcy is easier to survive than going to debtor’s prison and that’s what our country was built on. While responsible financial behavior is the goal, a new start is sometimes necessary. Our constitution is based on the knowledge that…..life happens.

Bankruptcy - life happens

Bankruptcy is an opportunity to get up, dust off our jeans, lick our wounds and try again. There is no shame in that. There are different types of bankruptcies allowing for complete discharge of debt or paying debt off in a safe financial way over a period of time. There are non-bankruptcy workouts allowing us to negotiate with our creditors. If you own a business, you can restructure to save your company and the jobs it provides.

While I wish everyone well, I understand that life happens and sometimes we just need the opportunity to start over. Bankruptcy is not the end of the world, its life happening with new knowledge and a fresh start.

Bankruptcy is not for everyone. It should be carefully weighed as one of several options. In my office, all options are discussed to find the right solution for each individual situation.

Can Bankruptcy Stop An Eviction?

Can Bankruptcy Stop An Eviction?

Bankruptcy Stamp in blue and blackLike everything else, it depends.  An eviction is a process by which a landlord can regain possession of a rental property from a tenant relatively quickly.  If a tenant has failed to pay the rent or is otherwise in violation of the rental agreement at the process can take three or four weeks from the first “Notice to Pay Rent or Vacate” until the Sheriff arrives at the door to remove the tenant.

In Washington, if rent is not paid according to the 3 day notice, an eviction lawsuit is filed and a hearing is set about 10 days from the filing.  The tenant must appear and “show cause” why they should not be evicted. Normally this is limited to stating that the rent has been paid or that there is some reason why the rent is not due.

Write of Restitution

If the tenant cannot make this showing, then the court issues an order giving the landlord the right to possession of the property and issuing Writ of Restitution which tells the Sheriff to remove the tenants. The Sheriff serves the Writ by posting it on the door.  In about three days the Sheriff will return and make sure that all occupants are out of the property.

A bankruptcy filing puts a stop to all attempts to collect debts or take property of the debtor, at least until there has been a meeting with the bankruptcy trustee, a motion to lift the automatic stay or the case is closed. If a Writ of Restitution has already been issued however, the eviction may proceed.

Eviction Under A Lease

It does make a difference whether the tenant has a lease for a term of months or years or is renting under a month to month rental arrangement. If there is a lease, then the tenant has a property interest in the remaining months of the lease.  If the tenant files a Chapter 13 bankruptcy, which involves a payment plan, the past due rent can be paid over the 36 to 60 months of the Chapter 13 Plan.  The rent due for months after the filing is also paid through the Chapter 13 Trustee.  Although bankruptcy does not give the tenant any additional right to renew or extend such a lease it can provide a way to keep current while finding a new place to rent in an orderly fashion.

Even in a month to month rental situation, state law requires a 20 day notice to terminate the tenancy. Only then can an eviction proceeding be started. If a bankruptcy is filed before the Order for Possession has been granted, the tenant will still have some extra time, a month or six weeks perhaps, within which to find a new place.

The facts of each case will determine the legal effect of a bankruptcy on an eviction. Be sure to contact an experienced bankruptcy attorney to fully understand your rights under the bankruptcy law.